When a short-term money crisis hits a family, payday predatory lenders are there for the working poor. These lenders reap huge interest payments that, according to the Federal Trade Commission, can reach up to 390 APR. Meanwhile these companies regularly take working people down the path to bankruptcy.
The car broke down and you have to get to work…you’re caught. You might have been able to pay off the principal, but with fees and interest, in 60 days the amount you owe has almost doubled. Many have to take out a second and third loan to pay off the initial amounts. If this isn’t what most of us consider to be loan sharking, what is?
No wonder there are said to be more payday loan store fronts in Indiana than Starbucks. These companies—most owned out-of-state—are pulling millions of profits out of Indiana off the backs of those who can least afford it, and Black borrowers are almost three times more likely to suffer their onerous collection tactics. Bankruptcy caused by payday loan methods is common and can financially ruin a family for years, if not a generation.
House Bill 1026 Introduced by Carey Hamilton would change the current incremental finance charge limits on small loans to a maximum annual rate. The bill would prohibit deceptive acts and create penalties for lenders who violate the law. A number of these bills have been floated here in years past, and while our legislators talk and talk, twenty-five other states have signed rate caps into law. Military people, reentrants, and Social Security recipients are prime targets of these loans, and if a borrower has any equity in their home, these lenders go after it with a vengeance leading to homelessness for more than a few borrowers.
Eighty-eight percent of Hoosiers support a 36 percent APR cap. Yet year after year the Indiana Senate Committee on Financial Institutions effectively kill the bills that have been offered by the House. This year, the Indiana Senate has put forth a bill with the number “36 percent” in it, hoping to subdue critics who are pushing for a cap at 36 percent APR. But the words “36 percent” without an annual percentage rate condition is virtually meaningless.
All Hoosiers should be behind policies that include realistic payment rates and transparent terms. We need stronger underwriting standards, such as an ability-to-repay, proper disclosure, and accurate reporting to credit bureaus. This is what we would demand for ourselves. Shouldn’t we want this for our neighbors who are financially vulnerable and in need?
Let’s get this done,
Nancy
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